Wednesday, April 16, 2014

Why We Should Not Rejoice About 2% Price Inflation

David Stockman has done excellent work showing the damage that seemingly mild-mannered price inflation at the rate of about 2% a year does to society. The purchasing power of the dollar shrinks significantly and we are generally worse off, especially those who must live on fixed incomes. Take a look at what the Fed has wrought over the past thirteen years, all the while trying to frighten the masses about the specter of deflation.

Tuesday, April 15, 2014

Why Yellen and Bernanke Should Be Sleeping Better

Consumer prices rose in March at an annual rate of 2.4%, according to the BLS. As a writer at Bloomberg News reveals, "The Fed’s goal of 2 percent inflation has proved elusive as the economic expansion was slow to gain momentum." The writer reminds us that the goal of the Fed is to perpetually shrink the purchasing power of the dollar. She also reveals the standard Keynesian mindset that economic progress means higher prices due to the economy being "overheated." In fact this could not be farther from economic reality. Economic expansion, by definition, means increases in output. As the supply of various goods increases relative to demand, their prices fall not increase, as more eager sellers bid down their selling prices. Economic expansion makes society better off, because consumers enjoy the opportunity to buy more goods at lower prices. All of us, thereby have the ability to achieve more of our ends. If prices are on the rise--and they are--this is due to the Fed's bankrolling monetary inflation, not due to any real recovery.

Friday, April 11, 2014

Does the Road Out of Poverty Run through Sweatshops?

Ben Powell, director of the Free Enterprise Institute at Texas Tech University, presented a great lecture last week to students in my Economic Expansion and Development class. Powell is on a tour promoting his latest book published by Cambridge University Press entitled Out of Poverty: Sweatshops in the Global Economy. Their function is not what you think.

Powell's primary goal is to educate people to the positive economic role sweatshops play in the lives of poor people who work in them. Additionally he hopes to encourage those who truly want to help the poor to do no harm mistakenly encouraging policies that will result in factories that close  because of rising costs and lower demand for their products. Such policies only make it more likely that poor workers in less developed countries have fewer opportunities and therefore will be faced with even worse working conditions and lower and less stable wages.

Here is Powell in a brief video that introduces many of the themes in the new book:

Tuesday, April 8, 2014

What You Need to Know about Equal Pay

Earlier today while surrounded by women President Obama again demonstrated his fondness for governing by dictate and signed two executive orders designed to force federal contractors to pay women as much as men for equal work.One prohibits government contractors from punish workers who talk about their wages. The second ordered contractors to compensation data based on sex and race to the federal government.

The move is obviously designed to shore up his electoral base among women voters. President Obama's rhetorical justification for added more labor market regulations is that full-time working women still earn 77 cents to every dollar earned by men. This statistic is not as egregious as the old "59-cent statistic," but it is merely a more contemporary variation of the same theme: there is obviously rampant discrimination on the basis of sex in the work place.

The reality is somewhat different, as I was able to write about many moons ago. It turns out that family ties are the primary explanation for men and women taking different jobs that pay different wages. Marriage and child rearing result in many women making choices that put them on a lower earning trajectory. Women have higher turnover rates and fewer continuous years on the job than men do. More women work part-time jobs than men and have a higher rate of absence than men. Women also tend to seek out occupations where an absence to raise a child will not make them obsolete.

What I said then still stands today:
[T]he performance of women's earnings over time is not the result of systematic discrimination. Whether egalitarians like it or not, for the "average" woman her family life trumps other concerns on the margin. Employers and employees are merely recognizing this fact of nature: women and men are not equal in the sense of being identical. They are different and have different comparative advantages when it comes to work outside the home versus child rearing.
Of course, both men and women would like to work for much more than what they are getting paid, other things equal. But then, the other things are never equal. That fact serves as a useful devise for egalitarian politicians and bureaucrats. Social engineers use the persistence of inequality of income as the warrant for never-ending regulation.
By the way, if it is really true that businesses easily discriminate by paying women twenty-three cents an hour less than men, would it not be in their interest to hire only women? That they do not do so seems to indicate that any compensation gap is not due to irrational discrimination.

Monday, March 31, 2014

Major in Economics, Get Lots of Offers

According to the National Association for Colleges and Employers, economics is the number 2 major to to generate a job offer before the student completes his course of study. Bully for economics!  I say come to Grove City College and major in the real deal: Economics as if Human Action matters. That is to say, economics in a causal-realist framework in the tradition of Menger, Bohm-Bawerk, Mises, Rothbard, Sennholz, and Herbener. If you do, you will study from the only undergraduate economics department with 100% full-time faculty representation at the most recent Austrian Economics Research Conference. You will also study from the works of the masters as well as what has been called "the gold standard of introductory treatments of economics in the causal-realist tradition."

Saturday, March 29, 2014

Ritenour on Power Trading Radio

Yesterday I was the guest on Power Trading Radio co-hosted by John O’Donnell and Merlin Rothfeld. Fun fact: John O'Donnell received his B. S. in science from Southwest Baptist University, where I used to teach before coming to Grove City College.

We talked about government statistics, the Federal Reserve, and the needless fear of lower prices. You can listen to the program by clicking here. The program often features Austrian economists on Friday afternoons at 6:00 pm Eastern and listeners can submit questions to the experts.You can watch a video of my appearance on the show by going to this page.

Monday, March 24, 2014

Jim Grant Explains Why Henry Hazlitt Is His Hero

Last Thursday, the ever-interesting Jim Grant gave the Henry Hazlitt memorial lecture at the Austrian Economics Research Conference hosted by the Ludwig von Mises Institute. Grant is the editor of Grant's Interest Rate Observer and was his normal self: provocative, insightful, analytically sound, and humorous--often all at once. Treat yourself to his lecture below:

A personal highlight of the conference was my meeting him and his graciously autographing my copy of his Money of the Mind.